Different company purchased Canadian operations, changed benefits
The Alberta Court of Appeal has affirmed the certification of a class action lawsuit filed by employees of an American oil and gas company, but the court deleted a claim in unjust enrichment.
Apache Corporation is a Texas-based company engaged in worldwide petroleum and natural gas exploration and production. The dispute in Flesch v. Apache Corporation, 2022 ABCA 374, started when Apache announced it was withdrawing from its Canadian operations in 2017. Apache then sold its shares to Paramount Resources Ltd. After it took over, Paramount continued to employ more than 300 employees of Apache.
Apache advised its employees who were involved in its Omnibus Compensation Plan that all awards under that plan, restricted stock units, stock options, and performance awards would be cancelled. The employees would be entitled to participate in Paramount’s share options, which allegedly granted employees less benefits than the Apache plan. The affected employees filed a proposed class action lawsuit against Apache and Paramount, alleging breach of contract and unjust enrichment. The chambers judge decided to certify the class action.
The Alberta Court of Appeal explained, “the primary purpose of class proceedings is to facilitate access to justice, judicial economy, and behaviour modification, with the general objectives of fairness and efficiency.” The appeal court further said that at the certification stage, the judge is ruling on purely procedural questions by determining whether the pleading disclosed causes of action.
Paramount assailed that certification, asserting that the chambers judge made an error in concluding that there was a cause of action against Paramount for breach of contract as a result of the “common employer doctrine” and unjust enrichment. The appeal court emphasized that with respect to commonality of issues, the plaintiff must only provide “some basis in fact.” At the certification stage of analysis, no evidence is required to prove a cause of action. The plaintiff must plead all of the material facts that could establish a cause of action in law.
Contractual relationship exists
Apache and Paramount argued there was no basis in fact to conclude they were common employers of the employees. They asserted that the fact that one company is a subsidiary or affiliate of another or that two companies co-ordinate their activities is not evidence of common responsibility, common ownership, or common liability.
However, the appeal court found that common issues on contractual relationship between the parties were appropriately identified and certified by the chambers judge. The court considered the conflicting provisions in the Apache compensation plan and the evidence of the employees as to the close operational relationship between the companies with respect to the plan, human resources and compensation overlap. The court concluded that the low evidentiary threshold for certifying common issues resting upon joint contractual obligations of the companies had some basis in fact.
Apache and Paramount asserted that the employees’ claim of unjust enrichment could offer no residual benefit to members of the class and therefore should not be certified. The appeal court agreed with this point. Apache and Paramount argued that if the employment contracts were breached, the employees would have their full remedy for which they were entitled in contract, and it could be readily realized from Apache. If they were not breached, there would be no unjust enrichment as Apache and Apache Canada would have a juristic reason for their position and the employees would not suffer deprivation, as they would receive exactly the benefit to which they were entitled pursuant to the terms of the contracts.
Thus, a claim for unjust enrichment provided no incremental benefit to members of the class and they had no reasonable chance of success on this cause of action, said the companies.
The appeal court observed that there would be no circumstances in which a claim in unjust enrichment would be available to the class members which their various contract claims would not provide. The court ruled that the issue on unjust enrichment was a “hollow cause of action” as it provided no incremental benefit to the members of the class. Consequently, the court ordered its deletion as a common issue, but allowed the class action to proceed.